Question

Retired public school teacher, age 65, has deposited a total of $10,000 into a nonqualified variable annuity, and her account's current value is $16,000. if she wishes to take a lump-sum withdrawal of the full amount, how much of this withdrawal is taxed at the ordinary income tax r

Answer 1

The answer is - $6,000.00
Step-by-step explanation:
Contributions to a nonqualified annuity represent cost-base dollars. When the contributions are paid out, cost base represents a return of capital and is not subject to tax. The growth in an annuity is taxdeferred
and is taxable upon receipt. In this case, of the total distribution of $16,000, the return of contributions was $10,000, leaving $6,000 taxable as ordinary income.
Reference: 3.8.1 in the License Exam Manual.